[00:00:02] Speaker 02:
Case number 16-1412, United States Postal Service Petitioner versus Postal Regulatory Commission.

[00:00:09] Speaker 02:
Mr. Belk with petitioner, Ms.

[00:00:10] Speaker 02:
Kershvane with the respondent.

[00:00:13] Speaker 01:
Are you guys still here?

[00:00:15] Speaker 00:
So this case is about the price of the... May it please the court.

[00:00:23] Speaker 00:
Good to see you all again.

[00:00:25] Speaker 00:
I think the issue here is more basic, I hope it is, than the issue before.

[00:00:29] Speaker 00:
The issue there was essentially whether

[00:00:31] Speaker 00:
a change in a mailing requirement can change the rate for a service by essentially forcing the others to pay more for it.

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The issue here is, does the price cap regulate not only the prices we charge, but the services we offer?

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Does it essentially regulate the portfolio of services?

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The commission held that it did, and we think they're wrong both on a statutory basis and sort of for arbitrary and capricious reasons.

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The statutory argument is that

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that there are two different sections of the statute.

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One regulates rates and one regulates our product list.

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The commission treated this as a product list change, but it alone suggests or strongly suggests that Congress did not view a change in rates as synonymous with a change to the menu of services, the portfolio of services.

[00:01:19] Speaker 03:
Not synonymous, but it's hard for me to see that.

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Congress made the two mutually exclusive.

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And I think that's in the 2015 opinion.

[00:01:29] Speaker 00:
That they are or they are not mutually exclusive.

[00:01:35] Speaker 04:
You could have a product change and then it leads to a price change.

[00:01:39] Speaker 00:
Yeah, I mean, I think that the 2015 opinion didn't speak of product changes.

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It spoke of requirements for rates within a product.

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So I think that a product change, a change to the

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to the list of market dominant products or the, you know, composition of our services.

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I didn't see anything in that opinion that suggested the price cap should apply to that because, I mean, in the earlier case, the barcode case, we weren't changing the nature of the service we were offering.

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We were just changing what you needed to do to get it.

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The underlying service is the same here.

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We're saying we're not charging you more for it.

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We're not making you do something different to get it.

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We're saying we don't want to offer it anymore.

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And that, to me, does not sound like a rate change.

[00:02:22] Speaker 00:
That sounds like a request to the commission, which, you know, again, we didn't do this unilaterally.

[00:02:28] Speaker 00:
We requested the commission.

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We want to change the product list.

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We want to get rid of the service.

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We don't want to offer it anymore.

[00:02:34] Speaker 00:
The commission analyzed that, said, yep, good reasons to get rid of it, and then said, but you, of course, are going to have to pay for it in the form of a price increase.

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And that leads to the sort of the second bucket of arguments that,

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that even if the statute didn't foreclose treating change to the nature, to the array of services we offer as price changes, there's sort of a lack of reason decision making here.

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I mean, the most obvious one is that, you know, a regulator generally has to treat like cases alike, and the commission has never before that we know of, and I don't know, I'm sure, has not treated other changes to the product list as also rate changes.

[00:03:16] Speaker 03:
The Postal Service deleted COD to the home, right?

[00:03:22] Speaker 00:
We didn't propose deleting it.

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Oh, you mean to the home, right?

[00:03:26] Speaker 00:
We proposed changing the parameters of what we were offering.

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So there hadn't been an earlier COD service at the Post Office?

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What our proposal was was to change, it was collect on delivery, it was the service where essentially instead of, I mean you know what the idea is that the recipient of the product has to pay, we collect the payment and bring it to the center.

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The change we were proposing making to that was rather than have the recipient be able to

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get that piece of mail at their home and pay their letter carrier the amount.

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They had to go to the post office.

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And I think there was some risk.

[00:04:08] Speaker 03:
So there had not been, before the proposed change, any service?

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at the post office with perhaps a different price.

[00:04:17] Speaker 00:
No, it was the same.

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There wasn't a different service with the same price.

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We were charging the same price and altering essentially what you got for it.

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The argument was, or the reason we did that is there was some fear of theft with our letter carriers.

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And so we wanted to just change it.

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In our view, that was a reasonable change to a product definition.

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It wasn't a rate change, because we weren't charging a different price.

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And the commission, I think, agreed with that, that it wasn't a rate issue.

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It was just the nature of what you're offering issue.

[00:04:50] Speaker 04:
And you went ahead with that?

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And that was reviewed under the commission?

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We ultimately didn't go ahead with that, because I think the commission deferred the question of whether the regulatory issue

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of changing.

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I can't remember exactly how it came out, but we ultimately didn't go forward with it.

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But again, it wasn't a rate issue.

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This is different than that, though.

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This isn't a we want to

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tweak what we offer.

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This is we offer a range of ancillary add-on services, and we didn't want to provide this one anymore on the ground that it had fallen into disuse.

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It was sort of confusingly similar to other products that we offer.

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And now they're coming back and saying, yes, it is a rate change because you have certified mail with the physical return receipt.

[00:05:34] Speaker 00:
Yeah, and those are different

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different services.

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I mean, that was, they were approved, the commission approved them as different services.

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They didn't approve them as different rates within one service.

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I mean, we do, you know, there are certainly similarities.

[00:05:47] Speaker 01:
The basic assumption that they're making with which you take credit exception is that because there is one common feature, this is like the last case, you're forcing people into a higher rate category.

[00:06:00] Speaker 01:
That's the assumption you're saying.

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That assumption is not shown anywhere.

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First of all, they're not the same services, and there's nothing to show, because they're alternatives up and down.

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That's really the argument here, which makes it very different from the other one.

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They're clear services up and down, and there's one little common feature, and you're saying, all we've done is just delete something, and you approved it.

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I mean, we're saying either there are no alternatives because they're different services, or there are two alternatives, one up, one down.

[00:06:27] Speaker 00:
Right, exactly.

[00:06:28] Speaker 01:
You're starting out essentially saying it's not a matter of alternatives, maybe because there's one feature that's the same

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I mean it's like arguing that with all these services you have to go to the post office so there's a common feature.

[00:06:40] Speaker 03:
To be fair to the Commission, it seems to me their notion, as I get it, picking an alternative, assuming it's proper to go to the question of finding an alternative, is to ask if there is some service still offered which although it may have

[00:07:01] Speaker 03:
all kinds of wonderful stuff attached to it enables the mailer to get exactly what he got before.

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And so if such a service and rate are out there,

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we assume that these people formerly taking postcards will continue to get postcards and pay for all these bells and whistles, right?

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Where they get that, I don't know.

[00:07:36] Speaker 00:
You have two different things there, but I think the good news is that under 3642, that's exactly the type of inquiry that the commission engages in.

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The statute requires in determining whether we can eliminate a service, add a service,

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to consider the views of users of the mail.

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So the commission can target its inquiry into exactly that kind of question.

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That if purchasers of return receipt for merchandise came back, and we propose this, right?

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This isn't, we can't do this unilaterally.

[00:08:05] Speaker 00:
We propose to the commission, and if users of the mail came, or users of this service say, oh, you know, this isn't really fair to us because the only reason we like this service is because of this one feature.

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And to get that one feature, we now have to buy up to something else.

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That is an argument in favor of denying the request, right?

[00:08:22] Speaker 00:
I mean, but having granted the request, having said, no, no, no, there are good reasons to get rid of this, it's odd that they then treat it as a price cap issue, because the price cap really isn't designed to protect the users of this service.

[00:08:37] Speaker 00:
It's a cap on our, essentially our prices.

[00:08:41] Speaker 00:
The, what was I going to say?

[00:08:44] Speaker 00:
Oh yeah, I mean, but just back to the matter of being consistent, that the,

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If the commission hasn't treated the addition of a new service as a rate change or the transfer of the service, which is essentially just eliminating it from the market dominant list and adding a parallel new service to the competitive list, it's unexplained why it would treat the removal of a service from the menu as a rate change.

[00:09:09] Speaker 00:
And it's especially odd that they would apply a test that they developed specifically for mail preparation changes, which we can generally do unilaterally.

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Otherwise, why they analyze sort of a request to the commission to remove a service as that.

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But I think the, one other question, one other point about the alternatives.

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As we say, they're either zero because they're different services or they're two.

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The commission should at least consider the fact that the reason that this particular service we want to get rid of has fallen into disuse is people are buying down.

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So whatever features the commission thinks are, you know, make it facially more analogous.

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The market sees the lower, the less expensive one is potentially the clearest alternative.

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But the point is there.

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Well, but does that matter in our disposition?

[00:10:03] Speaker 00:
It shouldn't because that's actually the second should not.

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Because step one is, is it a rate change?

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It's only when you say there's a rate change do you get to step two.

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What effect is it?

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And step two should have been.

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As the commission said in the earlier case, that once you get to that step, you generally hold mailer behavior constant.

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Had they done that, they would not have said, they instead guessed what mailers will do if they couldn't get this service anymore.

[00:10:29] Speaker 00:
But I think our fundamental point is that this is not a

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not a change in rates in the first place.

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It's just a change to our menu of offerings that's separately analyzed under Section 3642.

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If the court doesn't have any further questions, I hope to return on rebuttal.

[00:10:48] Speaker 04:
Okay, we'll give you some time on rebuttal.

[00:10:53] Speaker 03:
Could I start out by asking you whether you agree with Mr. Bell that once you have one of these rulings, and assuming the Postal Service goes ahead with the change, and I think it applies across both cases, forever and ever, well, of course, there's another world.

[00:11:15] Speaker 03:
I mean, you know, that's what Congress will do and so forth.

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Forever and ever, there's a phantom income.

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imputed to the Postal Service through every piece of mail that is going under that has been theoretically shifted to this higher-priced service.

[00:11:38] Speaker 02:
I'm glad you asked that question, Your Honor, because no, that's not correct.

[00:11:41] Speaker 02:
That's not the commission's position.

[00:11:44] Speaker 02:
What it's doing when it figures out the rate change is looking at the price of sending the same mail last year and this year.

[00:11:54] Speaker 02:
So that mail is reallocated in the first year, and then in the next year, there's no more reallocation to be done.

[00:12:03] Speaker 02:
We've sort of gotten rid of that price.

[00:12:04] Speaker 02:
So if you think about, say there are

[00:12:07] Speaker 02:
10 pieces of mail, obviously, not the real number, going by the return receipt mail last year.

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And those pieces of mail are all going to be treated as certified mail as return receipt.

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And so it's something like an extra

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$1.50 or $15.

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Next year, when we look at the price of sending last year's mail this year, there won't be any mail coming in as return receipt mail, because that has been eliminated.

[00:12:36] Speaker 02:
So all of the mail is either already going to be coming in as signature, the electronic signature confirmation, or a certified delivery with return receipt.

[00:12:46] Speaker 02:
So the effect only lasts one year.

[00:12:47] Speaker 03:
You're saying if the services prediction is correct,

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Phantom revenue lasts only for one year.

[00:12:58] Speaker 02:
That's right, Your Honor.

[00:12:58] Speaker 02:
But of course, this is a price cap calculation.

[00:13:00] Speaker 02:
So it's not actually calculating the revenue.

[00:13:02] Speaker 02:
It's calculating the price.

[00:13:05] Speaker 02:
The change in price.

[00:13:06] Speaker 04:
Only the incremental change in price.

[00:13:08] Speaker 02:
That's right.

[00:13:09] Speaker 02:
So the difference between the same maya last year and this year.

[00:13:14] Speaker 04:
So it'll just wash out.

[00:13:14] Speaker 04:
I mean, either way, whether they're right or whether they're wrong, it's just been counted once in that one year.

[00:13:21] Speaker 04:
and it may have been counted radically wrong, but it's just one year and it's over.

[00:13:26] Speaker 04:
That's right, Your Honor.

[00:13:27] Speaker 04:
And does it affect, does it affect the baseline for the following year?

[00:13:36] Speaker 04:
Does the assumption, the historical volume assumption, it does affect the following year, the historical volume assumption that was made, for example, if here we think all the people who got returned

[00:13:51] Speaker 04:
receipt for merchandise, the assumption is they're all gonna go for certified mail.

[00:13:57] Speaker 04:
And if that, right, with a return receipt.

[00:14:01] Speaker 02:
We're not making assumptions about what people will do, but we reallocate that mail.

[00:14:04] Speaker 04:
The treatment, the treatment is to treat that as everybody's gonna do that, just formally based on what they did before, same service, certified mail with return receipt.

[00:14:16] Speaker 04:
Does that have any legacy effect?

[00:14:19] Speaker 04:
on the way the price cap is applied going forward?

[00:14:26] Speaker 02:
No, so the next year we would look at the mail that came in in that next year where there is no return receipt mail because that's been eliminated.

[00:14:35] Speaker 02:
And we would look at how much it cost to send that mail last year and how much it sent that mail the next year.

[00:14:42] Speaker 02:
So the return receipt mail would be completely gone because no return receipt mail would

[00:14:48] Speaker 02:
would come in in the next year.

[00:14:50] Speaker 03:
As my answer... And if the post office is right in saying that everyone goes to the much cheaper product, all the former return receipt people, everything's fine for the second year.

[00:15:04] Speaker 03:
But in the year in question,

[00:15:07] Speaker 03:
that the post office is barred from rate, potential rate increases that might well fit within the rate cap if it's view were taken.

[00:15:24] Speaker 02:
So if in year one, when it gets rid of return receipt mail, it uses its rate cap space to get rid of return receipt mail, then it can't raise other rates in the category.

[00:15:35] Speaker 02:
The category as a whole has to fit within the rate of inflation.

[00:15:39] Speaker 02:
But of course, if there's a service like this one where there are declining volumes, the amount of rate cap that it would take to make the change goes down and down.

[00:15:50] Speaker 02:
So if only a few people are using return receipt mail, it doesn't take very much rate cap to get rid of it.

[00:15:56] Speaker 02:
But for those people who continue to use it, if they go to the post office and they say, I want that postcard,

[00:16:03] Speaker 04:
We're going to assume that they're going forward.

[00:16:05] Speaker 04:
But when you say that the overtime effects, it's a little bit confusing the way I think the way we're talking, you're positing there are different times at which this one-time event might occur.

[00:16:15] Speaker 04:
If it occurs when the change has already largely taken place, then the elimination of the service is going to be cheaper in rate cap terms.

[00:16:25] Speaker 04:
than if this one time, one expense, one year use of price cap authority is done earlier, it's a bigger dislocation to the public, says the commission, and it's also gonna cost them more of the price cap.

[00:16:38] Speaker 04:
But either way, it doesn't matter whether, after it's done, it doesn't matter whether the commission was right or wrong in assuming that the people who used to get RRM

[00:16:54] Speaker 04:
are gonna go to certified mail with return receipt or not.

[00:16:57] Speaker 04:
It just doesn't matter because it's done, it was treated that way.

[00:17:00] Speaker 04:
And there's no legacy effect of whether that was right or wrong on the price cap.

[00:17:06] Speaker 02:
Right, so maybe some of those people will go to certified mail with return receipt and then the next year, the volume for certified mail with return receipt will be a little higher and some of those mail people- And we don't even care what that is, what that volume is, until there's a different change in that service category

[00:17:22] Speaker 04:
And then we sort of reactivate and say, okay, what is the historical volume in each sub-part of the service category to calculate the price cap so we can apply it to the new change?

[00:17:34] Speaker 04:
So the only time the actual effect of what mailers do in response to the elimination of a service matters is sometime down the road, maybe it's the very next year, when a new

[00:17:49] Speaker 04:
price cap is being calculated and the volume is being allocated to different services.

[00:17:55] Speaker 01:
Right?

[00:17:55] Speaker 01:
Whatever your answer is, I'm lost.

[00:17:58] Speaker 01:
Me too.

[00:17:59] Speaker 01:
I'm totally lost.

[00:18:01] Speaker 01:
I'm a little worried about the answer for that reason.

[00:18:03] Speaker 01:
Because if the effect on the price cap is essentially nothing, then I don't know why you're pushing it.

[00:18:08] Speaker 01:
Obviously, there's

[00:18:10] Speaker 01:
an impact that's a moment to you.

[00:18:12] Speaker 03:
I take you to be saying that this impact in year one.

[00:18:15] Speaker 03:
Period.

[00:18:16] Speaker 03:
Period.

[00:18:16] Speaker 03:
Full stop.

[00:18:17] Speaker 02:
Right.

[00:18:18] Speaker 02:
And then the following year, there is no mail in the return receipt category, so there's nothing to reallocate, and we stop thinking about the question entirely.

[00:18:27] Speaker 01:
Yeah, but the question, they have asserted that that impact continues.

[00:18:32] Speaker 01:
They're locked in.

[00:18:32] Speaker 01:
We'll hear from them on rebuttal on that.

[00:18:36] Speaker 01:
But in any event, I don't know how, whatever the consequences, it's based on an assumption that's not proven.

[00:18:43] Speaker 02:
So it's not an assumption.

[00:18:45] Speaker 02:
It's the same thing that we were doing last time where we take the historical volume.

[00:18:48] Speaker 02:
We say if somebody asked for the postcard with the signature on it last year.

[00:18:54] Speaker 03:
You do it by this rigid practice of saying that

[00:19:01] Speaker 03:
If the alternatives are, suppose B is dropped out, we have A and C, and A is very similar and low price, but not completely similar.

[00:19:14] Speaker 03:
It doesn't get the mailer everything you wanted.

[00:19:19] Speaker 03:
Compare that with C, which has everything the B mailers got before, plus the moon.

[00:19:27] Speaker 03:
We assume they all go to C.

[00:19:30] Speaker 03:
Right?

[00:19:31] Speaker 03:
That is what, as I understand it, and incidentally, the closest I've come to an articulation of this is footnote 25 and its docket R2017-1.

[00:19:43] Speaker 03:
And I'm not sure what it is because I've only printed out the page with the footnote, but it seems to come as close as anything to stating a rule on this without any justification for it.

[00:20:00] Speaker 02:
So I think the best statement of it might be going back to that 2007 rulemaking where we decided that this was the way we were going to calculate changes in rates and the postal services submission then, page 8 footnote 5.

[00:20:14] Speaker 02:
For other purposes, it may be useful to estimate what the volume proportions might be.

[00:20:20] Speaker 02:
after rate distinction was introduced, did mailers respond to the new price incentives?

[00:20:25] Speaker 02:
But that exercise should not be confused with the augmentation of historical billing rights, I'm sorry, this is very technical, for purposes of calculating compliance with the rate cap, right?

[00:20:37] Speaker 02:
So what the Postal Service said initially, and what we do, because we cannot make predictions, some people will pay more, some people will pay less, we don't know what the numbers will be, and we can't figure that out in the 45 days,

[00:20:50] Speaker 02:
The commission can't figure that out in the 45 days that Congress gave them.

[00:20:53] Speaker 02:
So what the commission does is it just says, if last year you went to the counter and said, I want to send this so I get the postcard with the original signature, you would pay for return receipt mail.

[00:21:07] Speaker 02:
Next year, I want to send it so I get the postcard with the original signature, you pay for certified mail with return receipt.

[00:21:15] Speaker 02:
people are going to make different choices in response to the cost incentives, but we don't know what those choices are going to be.

[00:21:23] Speaker 02:
And so this is entirely consistent with our regulatory scheme.

[00:21:27] Speaker 02:
We can't predict that.

[00:21:28] Speaker 03:
Could you just clarify my thinking on sort of seasonality of all this?

[00:21:34] Speaker 03:
Is there a particular time where the service for the issue of

[00:21:42] Speaker 03:
The size of the rate cap and its computation is before the Commission, but the 45 days starts running and then it ends and so forth.

[00:21:52] Speaker 02:
So there's a process every year where the 45 days starts running.

[00:21:58] Speaker 02:
I don't know exactly

[00:22:00] Speaker 02:
how that's set up, but I believe it starts with the Postal Service coming in and making its proposal for the next year, and then the Commission gets responses, and there's the briefing.

[00:22:13] Speaker 02:
It can ask the Postal Service questions.

[00:22:14] Speaker 02:
There's a back and forth.

[00:22:16] Speaker 03:
But that whole process... When everything goes into effect January 1 of the following year?

[00:22:20] Speaker 02:
I believe that everything goes into effect January 1 of the following year, but I'm not 100% sure about the exact time.

[00:22:26] Speaker 02:
What I do know is that Congress

[00:22:28] Speaker 02:
in this statute gave the commission 45 days to make this determination.

[00:22:32] Speaker 03:
I wonder if you've attached much importance to that.

[00:22:35] Speaker 04:
So it's basically kind of like an annual budgeting.

[00:22:38] Speaker 04:
Every year, there's sort of these issues about price and application of the price cap with all the different changes that the Postal Service wants to make are looked at.

[00:22:45] Speaker 04:
Right.

[00:22:45] Speaker 04:
And so in the commission's... Under 36-22 analysis.

[00:22:48] Speaker 02:
Exactly.

[00:22:48] Speaker 02:
And when the commission's predecessor used to make predictions about how people would respond to incentives, that took, I think, 10 months to go through this whole process.

[00:22:56] Speaker 02:
They had expert witnesses.

[00:22:57] Speaker 02:
It was a big thing.

[00:22:58] Speaker 02:
The commission says, at the Postal Services recommendation, we can't go through this whole process in the 45 days.

[00:23:09] Speaker 02:
We just need a straightforward answer.

[00:23:11] Speaker 03:
And our straightforward answer

[00:23:14] Speaker 03:
all those complications developed in the context of indisputably rate changes, right?

[00:23:21] Speaker 02:
Yes, Your Honor.

[00:23:22] Speaker 02:
So 3642 tells us which product is on which list.

[00:23:27] Speaker 02:
If it's on the market dominant list, 3622 applies.

[00:23:32] Speaker 02:
That's the system for regulating rates and classes for market dominant products.

[00:23:37] Speaker 02:
So anything that's on the market dominant list that

[00:23:40] Speaker 02:
system that for figuring out the rate is going to apply to it.

[00:23:46] Speaker 02:
So this is really different from the situation in which we move something off of the market dominant list onto the competitive list.

[00:23:56] Speaker 02:
If something is moved onto the competitive product list, the market regulates the price and keeps the price from being too high.

[00:24:03] Speaker 02:
But anything that is on the market dominant list, on that list of products for which the Postal Service has a monopoly, those products are under the 3622 regulation.

[00:24:18] Speaker 01:
And again... You've never done this before, as I understand it.

[00:24:21] Speaker 01:
Your precedent just doesn't support this, where you have approved the removal of a service from the list.

[00:24:28] Speaker 01:
You've never engaged in rate cap analysis before.

[00:24:32] Speaker 01:
You have had similar situations before.

[00:24:35] Speaker 01:
You've never treated it this way before.

[00:24:38] Speaker 01:
And you're trying to treat this case like you were arguing the other case, based on an assumption that, well, they're really pushing people out of one because they have to go to another.

[00:24:48] Speaker 01:
That assumption isn't even supported, but in any event,

[00:24:52] Speaker 01:
You've never done this before where you have approved under a statutory provision that allows you to approve the removal of a service.

[00:25:00] Speaker 01:
You've never engaged in rate cap analysis before.

[00:25:02] Speaker 01:
Not that I can find.

[00:25:04] Speaker 02:
From the beginning, the regulation has required the Postal Service to address the rate cap effects.

[00:25:09] Speaker 02:
That's 30-20-23-B.

[00:25:11] Speaker 02:
There has not been a case like this where there is an alternative.

[00:25:17] Speaker 01:
Well, but that's the assumption.

[00:25:20] Speaker 01:
And the assumptions just, at least as far as I can see, the assumptions just not really supported in this case where there's an alternative.

[00:25:28] Speaker 01:
Of course, there are all kinds of alternatives in the postal service.

[00:25:31] Speaker 01:
You can always say there's a service that looks like the one that's been completely removed.

[00:25:36] Speaker 01:
And so we're going to assume that you've deleted one and are pushing people to that service, which is high in price.

[00:25:42] Speaker 01:
That just doesn't work here.

[00:25:43] Speaker 01:
They're completely different services.

[00:25:45] Speaker 01:
They have one little overlapping feature.

[00:25:49] Speaker 01:
But you can, I can't, you merely asserted a fact that is not supported.

[00:25:56] Speaker 02:
It's supported by the Postal Services Submission at JA 138 where they tell us that certified mail with return receipt is the alternative rate sale.

[00:26:05] Speaker 03:
It seems to me it's not altogether clear from that that the document purported to address the rate change issue

[00:26:14] Speaker 03:
And it certainly is something which is rejected by the Postal Service's response to the, whatever it is, the public.

[00:26:22] Speaker 03:
Right.

[00:26:23] Speaker 04:
And JA 173 to 74, the Postal Service says, oh, that's not what we meant.

[00:26:27] Speaker 04:
Once it becomes clear that that's how you're taking it, no, that's not what we meant.

[00:26:31] Speaker 02:
There is an alternative rate sale, right?

[00:26:33] Speaker 02:
You can still go to the counter and say, I want to send this so I get that postcard with the original signature.

[00:26:40] Speaker 04:
So you're assuming you're packing the answer into the question.

[00:26:42] Speaker 04:
What if you come and say, I just want delivery confirmation?

[00:26:46] Speaker 04:
I mean, you're assuming something that's a factual matter.

[00:26:49] Speaker 04:
You come and say, I just want a delivery company.

[00:26:50] Speaker 04:
Oh, yeah, I can do it by email now?

[00:26:52] Speaker 04:
Great.

[00:26:52] Speaker 04:
That's what I want.

[00:26:53] Speaker 04:
Right?

[00:26:54] Speaker 04:
And so it's sort of like, I mean, to me, I keep thinking about this as like the side order case.

[00:26:59] Speaker 04:
If you always go to medium rare, you say, I want an order of french fries.

[00:27:03] Speaker 04:
And all the teenage kids from the neighborhood go there.

[00:27:05] Speaker 04:
And the restaurant says, no, we want to upgrade.

[00:27:06] Speaker 04:
We don't want those teenage kids coming in for the french fries after school.

[00:27:10] Speaker 04:
So we're going to say, we don't serve a side of french fries.

[00:27:12] Speaker 04:
We only have the steak, tenderloin steak, with fries on the side.

[00:27:15] Speaker 04:
And you wouldn't say, you didn't eliminate, you eliminated the side order of french fries, the side order of french fries eliminated, right?

[00:27:25] Speaker 04:
Oh no, french fries still there next to the steak.

[00:27:28] Speaker 04:
It depends on how you describe it, right?

[00:27:30] Speaker 04:
And you're trying to say that they are still offering the french fries because they're on the side of the steak.

[00:27:36] Speaker 02:
I'm saying that for the people who only want the French fries, if they really want the French fries, they have to pay more, right?

[00:27:42] Speaker 02:
So for the people who really want the postcard, they have to pay more.

[00:27:48] Speaker 02:
Now the postal service can tell.

[00:27:49] Speaker 04:
But there was an actual assumption in that, that there wasn't in your use of the similar analysis in the last case, at least,

[00:27:56] Speaker 04:
What if I'm coming in and saying, I just want to know when it gets there?

[00:28:01] Speaker 04:
Because I don't want them claiming that it got lost when it didn't.

[00:28:04] Speaker 04:
I just want to know when it gets there.

[00:28:05] Speaker 04:
I don't need a physical document.

[00:28:07] Speaker 04:
I hate physical documents, right?

[00:28:10] Speaker 04:
But you're assuming that's not the person.

[00:28:12] Speaker 01:
Yeah, you're making a factual assumption that's just not supported.

[00:28:15] Speaker 01:
You're assuming something in the heads of these users that may or may not be right.

[00:28:19] Speaker 02:
Well, of course, the postal service can try to move people off of return receipt mail by having the people at the desk say, do you know, for $2 less, you can get electronic confirmation?

[00:28:32] Speaker 02:
And they can do that.

[00:28:34] Speaker 02:
And I believe they have already done that, right?

[00:28:36] Speaker 03:
It doesn't do any good in the first year.

[00:28:38] Speaker 02:
Well, so they would have to do that in year zero?

[00:28:41] Speaker 02:
So they do that.

[00:28:41] Speaker 02:
And they've already been doing that, which is why the volume is declining.

[00:28:46] Speaker 02:
If they do that in year zero and everybody says, ooh, I want the electronic one, then the price cap effect of getting rid of return receipt mail starts to report zero because nobody's actually using it.

[00:28:58] Speaker 02:
The people who are left here are the people who are saying, no, I want that physical postcard.

[00:29:05] Speaker 02:
If they have the choice of still paying even more for the physical postcard, they won't buy it.

[00:29:09] Speaker 02:
But that gets into the kind of predictions that we can't make in 45 days.

[00:29:13] Speaker 02:
The people who are here are the people who have said, I want the physical postcard, or who have not been given the information about the different rates.

[00:29:22] Speaker 02:
But the Postal Service has the ability to make this change, to encourage people to make the change by giving them the information that they can pay less and send their mail at a different rate.

[00:29:33] Speaker 02:
I see that I'm out of time.

[00:29:34] Speaker 02:
I'm happy to answer any additional questions.

[00:29:37] Speaker 04:
Thank you very much.

[00:29:38] Speaker 04:
Thank you.

[00:29:39] Speaker 04:
We'll give Mr. Belt a couple of minutes on rebuttal.

[00:29:48] Speaker 00:
Yeah, the I don't know who these people are.

[00:29:50] Speaker 00:
There were no people and that's part of the problem here.

[00:29:52] Speaker 00:
There were no people that came forward and said the only reason I use this service is to get this postcard.

[00:29:57] Speaker 00:
And it's also sort of odd

[00:29:58] Speaker 00:
that the theory is that the Postal Service has been driving down the volume of this service by encouraging people to buy a less expensive service, which we don't get any credit for, by the way, in terms of the price cap.

[00:30:08] Speaker 00:
It's not considered a reduction.

[00:30:10] Speaker 00:
We've been doing that as part of some odd, long con that at the end, when there are only a couple of people left, we're going to hit them with the right price increase.

[00:30:16] Speaker 00:
Why have we been encouraging everybody to buy down?

[00:30:18] Speaker 00:
It really, truly doesn't make any sense.

[00:30:20] Speaker 00:
The fact is there are two alternatives, or no alternatives, looked either way.

[00:30:25] Speaker 00:
There's no finding that the only reason the people here use this service is to get the feature that's only available for the more expensive service.

[00:30:34] Speaker 00:
The commission, in fact, is engaging in speculation.

[00:30:36] Speaker 00:
They are projecting why they think mailers are using that, which is exactly the opposite of what they said they did.

[00:30:41] Speaker 03:
It's slightly unfair, because what they are saying is not that we'll engage in speculation.

[00:30:47] Speaker 03:
We will simply

[00:30:48] Speaker 03:
remove this issue from the calculus, no matter what the truth, we will go ahead and count this revenue as if it were received, right?

[00:31:05] Speaker 03:
It's not speculation.

[00:31:06] Speaker 03:
It's just an order.

[00:31:08] Speaker 00:
I suppose.

[00:31:08] Speaker 00:
I mean, I think it's speculation.

[00:31:09] Speaker 00:
It's them saying, we don't know if people will buy up or buy down, so we'll say they'll buy up.

[00:31:15] Speaker 00:
I mean, I don't see how that's not speculation.

[00:31:17] Speaker 00:
We don't know why they're bad.

[00:31:18] Speaker 04:
They're choosing, I think the point is just that they're choosing that rule so that no speculation is involved.

[00:31:23] Speaker 04:
It's a formal rule.

[00:31:24] Speaker 04:
It's just a fiat.

[00:31:25] Speaker 04:
It's just like, this is the default rule.

[00:31:27] Speaker 04:
We're doing it.

[00:31:28] Speaker 00:
It's the opposite, though, in some ways, of the rule they rely on in the other case.

[00:31:32] Speaker 00:
The other case says, no change in mailer behavior.

[00:31:34] Speaker 00:
We're just going to assign this violation.

[00:31:35] Speaker 00:
Right, and here they're saying, you said, all I want.

[00:31:38] Speaker 00:
Well, we're going to make the choice for them.

[00:31:40] Speaker 00:
We're going to assume a change in mailer behavior, and this is the choice they'll make.

[00:31:42] Speaker 04:
And so they're no longer ordering the side order.

[00:31:45] Speaker 04:
They're ordering French fries wherever they come.

[00:31:47] Speaker 04:
Whereas if you're really rigid about wanting the same thing, it's wanting only the postcard.

[00:31:52] Speaker 00:
And there's just, again, no finding on that.

[00:31:53] Speaker 03:
And there's... Sorry.

[00:31:56] Speaker 03:
Was Commission Council correct in saying that the phantom revenue is countered against the Postal Service?

[00:32:05] Speaker 03:
only for the year immediately following this event?

[00:32:10] Speaker 00:
No.

[00:32:11] Speaker 00:
Actually, it continues on until a further change is made.

[00:32:14] Speaker 00:
As I understand it, maybe we're answering slightly different questions or I'm not understanding the question.

[00:32:21] Speaker 00:
The way I'm thinking of it is, we assume for whatever we're doing, that say there were 10 pieces that we're going to assume that are in question, and we're going to assume they're all going to spend more rather than less.

[00:32:33] Speaker 00:
And that for year one, they assigned the price cap hit accordingly.

[00:32:38] Speaker 00:
If in year two we came to them and said, actually, you were wrong about that, it's here.

[00:32:41] Speaker 00:
We don't get credit back.

[00:32:43] Speaker 00:
It continues on.

[00:32:44] Speaker 04:
You don't get credit back.

[00:32:45] Speaker 04:
But you only had to pay one time.

[00:32:48] Speaker 04:
So this is the story.

[00:32:49] Speaker 04:
I think that what they're saying is right or wrong is an empirical matter.

[00:32:54] Speaker 04:
We are going to charge you as if it were the case that everyone's going to do the certified mail.

[00:33:00] Speaker 04:
And it's going to cost you more if you do this when not that many people have shifted.

[00:33:05] Speaker 04:
It's going to cost you less if people aren't even wanting to do the RRM.

[00:33:10] Speaker 04:
But we're going to charge you once.

[00:33:12] Speaker 04:
And the price cap is only looking at the increment change in price, I think.

[00:33:18] Speaker 04:
And therefore, the following year, there's no increment change until some other price is being changed.

[00:33:27] Speaker 04:
And then you don't look back.

[00:33:30] Speaker 04:
you know, three years, you look at only the preceding years, so that it's just washed away whatever happened, right or wrong, accurate or not.

[00:33:37] Speaker 04:
When the RRM was dropped, now you've got a new array of actual behavior, and that involves maybe, if you're right, a miniscule amount of certified mail and a lot of, you know, electronic signature

[00:33:52] Speaker 04:
And that becomes the baseline that then, so you don't get it back, but you also don't keep, there's no legacy effect within the project that you have to pay, pay, pay.

[00:34:02] Speaker 01:
Well, but I think in a way there's- Why don't you argue with that there was, that amount is not insignificant, even if it's a year.

[00:34:09] Speaker 00:
Yeah.

[00:34:09] Speaker 00:
Oh, sure.

[00:34:10] Speaker 01:
Sure.

[00:34:10] Speaker 00:
Absolutely.

[00:34:11] Speaker 01:
But on top of that, I think there's- You can't minimize that this is a business and that's a lot of money.

[00:34:14] Speaker 00:
Yeah.

[00:34:15] Speaker 00:
And I think there is a legacy effect, at least in the following sense.

[00:34:18] Speaker 00:
I mean, I think it,

[00:34:19] Speaker 00:
I think what you said, I'm not sure I agree with.

[00:34:23] Speaker 00:
I'm tired.

[00:34:26] Speaker 00:
No.

[00:34:27] Speaker 00:
I can't imagine why.

[00:34:28] Speaker 00:
But there is one aspect that I think I do disagree with, where there's no legacy effect.

[00:34:33] Speaker 00:
I mean, an example would be, let's use RRM as an example, that the assumption is we're going to impute to you the revenue you would have gotten had everyone bought up, right?

[00:34:43] Speaker 00:
So that that's counts against us.

[00:34:45] Speaker 00:
It's a revenue that but if in reality we didn't get it in fact people bought down So we lose revenue in reality we get imputed revenue and then effectively lose revenue and also in reality and let's say in year two we choose to raise the price of signature confirmation

[00:35:02] Speaker 00:
We kind of get hit harder there because this revenue, the shadow revenue that went up, now they're looking at real volume that went down and we get charged again.

[00:35:11] Speaker 00:
Do you know what I'm saying?

[00:35:12] Speaker 00:
And so in that sense, certainly in that sense, there's a legacy effect.

[00:35:16] Speaker 04:
Well, you're saying there's a one-way ratchet because when you save money, you don't get credit against the price cap when you're charged as if you're getting revenue, you do pay for it.

[00:35:25] Speaker 04:
But that's sort of, it's not so much legacy effect as it's this,

[00:35:28] Speaker 04:
the asymmetry of the way the price cap accounts for supposed price rises.

[00:35:37] Speaker 04:
but not, as you say, discounts.

[00:35:40] Speaker 00:
Right.

[00:35:40] Speaker 00:
And I think certainly that's fair to say.

[00:35:43] Speaker 00:
And I think we're not claiming, for example, price cap credit for our efforts to encourage mailers for signature confirmation.

[00:35:50] Speaker 00:
We're trying to encourage them to use a product that would have more value to them to make us a more attractive provider of services.

[00:35:57] Speaker 00:
So we have benefits, but it's not a price cap.

[00:36:00] Speaker 00:
We're not claiming, oh, that's a price reduction.

[00:36:02] Speaker 00:
And actually, in some ways, this is very similar to intelligent mail.

[00:36:05] Speaker 00:
The Commission should be very careful in treating things as rate, as price cap issues, because we really can't get that back.

[00:36:13] Speaker 00:
So that's why, in some respects, these cases, why they're both important to us, is that the Commission is sort of treating everything it sees as a potential price increase when it should be.

[00:36:24] Speaker 03:
And there's a potential bad incentive effect on you to avoid

[00:36:30] Speaker 03:
creation of cheap alternatives.

[00:36:32] Speaker 00:
Well, absolutely.

[00:36:33] Speaker 00:
In fact, it's odd too, because in this particular case with the return receipt case, the commission specifically said there is not only good, but there is a need to get rid of what they called, how do they put it, but a need to get rid of services that are, where does it say that?

[00:36:50] Speaker 00:
But anyway, there's a need to get rid of services that are outmoded.

[00:36:53] Speaker 00:
Sort of cluttering the menu.

[00:36:54] Speaker 00:
There's actually, it's good.

[00:36:55] Speaker 00:
It's an actual good to simplify things.

[00:36:58] Speaker 00:
And yet, they're essentially telling us, but we don't, you know, what is the point of applying the price cap here if they think it's good?

[00:37:05] Speaker 04:
Do you have a figure on what this costs under its service category price cap?

[00:37:10] Speaker 00:
It wasn't much.

[00:37:11] Speaker 00:
I mean, in this particular case, but it was not nothing.

[00:37:13] Speaker 00:
I mean, I think it was $323,000 a year.

[00:37:16] Speaker 00:
So obviously, PAIL's in comparison to the $368 million that they are imputing to us under the barcode rule.

[00:37:25] Speaker 00:
And the potential, literally tens, if not tens of billions of dollars, that their analysis that council advanced today, where literally every mail preparation change is considered against the cap, that would probably be a fatal blow to the Postal Service.

[00:37:43] Speaker 04:
I think it would be 1.2 billion for the barcode.

[00:37:47] Speaker 00:
Sorry, it's 368 million now based on that 12%.

[00:37:50] Speaker 00:
Did I say 1.2 billion?

[00:37:51] Speaker 00:
But in the beginning, was it 1.2 billion?

[00:37:52] Speaker 00:
It was 1.2 billion.

[00:37:53] Speaker 04:
So the passage of time refraining from doing it has made it cheaper.

[00:37:59] Speaker 00:
Correct.

[00:38:00] Speaker 00:
Because now, when we first came to the commission at that time, it was 64% had already complied voluntarily.

[00:38:06] Speaker 00:
And they said, OK, well, essentially, if the other 36% don't,

[00:38:11] Speaker 00:
it would be $1.2 billion of revenue a year they would pay us.

[00:38:14] Speaker 00:
But of course, we will never get that, which was proven two years later when we came back to them and said, okay, well now, two-thirds of that money you said we were going to get every year is clearly not happening because these people have voluntarily complied.

[00:38:28] Speaker 00:
At that point, you would think the commission would have said, oh, maybe this isn't that big a deal.

[00:38:32] Speaker 00:
You know, maybe the mailers are equipped to handle this.

[00:38:34] Speaker 00:
This is actually not that big a change.

[00:38:37] Speaker 00:
But instead, they said, well, the last 12%, well, they won't comply.

[00:38:40] Speaker 00:
And the effect of that would be $368 million.

[00:38:44] Speaker 00:
And when I say the legacy effect, that really is $368 million they assume we would get every year going forward in the form of people not complying, when in fact they actually did comply.

[00:38:57] Speaker 00:
I mean, assuming we had gone forward with this, we couldn't because we didn't have, we can't afford taking a $368 million, let alone a $1.2 billion annual price cap hit.

[00:39:07] Speaker 00:
If it was just about us trying to get revenue, we'll just do that through pricing.

[00:39:11] Speaker 00:
We're certainly not going to take a cap hit based on revenue we're never going to see.

[00:39:15] Speaker 04:
And those figures are in the record, the $323,000.

[00:39:19] Speaker 04:
That's in the record.

[00:39:22] Speaker 00:
That's in our, in our, one of our comments in the,

[00:39:27] Speaker 00:
uh... below uh... there were very little very few comments in the return receipt case.

[00:39:31] Speaker 00:
Yeah, the commission just came out with the order.

[00:39:35] Speaker 00:
As for the 368 billion, that's explained in our brief.

[00:39:39] Speaker 00:
The 1.2 billion was in the record, and we illustrated in our comments below how you could back out now 700 and something million based on the people who have since complied voluntarily.

[00:39:51] Speaker 00:
And I don't think there's any dispute over any of those.

[00:39:53] Speaker 01:
Not to change the subject, but if you all go down to our cafeteria now for lunch and you want french fries, you have to get a blueberry muffin with it.

[00:40:01] Speaker 00:
All right.

[00:40:02] Speaker 00:
The thing is, you don't know why I wanted French fries.

[00:40:05] Speaker 00:
But thank you very much, Your Honor.

[00:40:07] Speaker 00:
Thank you for the extra time as well.

[00:40:09] Speaker 00:
We ask, of course, that both cases be remanded for a standard.

[00:40:13] Speaker 00:
And part of the problem here is we have no idea what's expected of us under these rules.

[00:40:17] Speaker 04:
I thought you were asking in the RRM case, not necessarily for a remand.

[00:40:21] Speaker 00:
No, that one we want.

[00:40:22] Speaker 04:
It's a statutory argument.

[00:40:23] Speaker 00:
It's a statutory argument.

[00:40:25] Speaker 00:
For RRM, we're saying that when you want to get rid of a service, you're not changing the price you're charging for it.

[00:40:31] Speaker 04:
And in the other case, remand with vacatur or without vacatur?

[00:40:36] Speaker 00:
There's no need for vacatur because they essentially prevented us from going forward because we essentially go back again for a clear standard.

[00:40:45] Speaker 00:
And also one that answers the relevant question, that is driven to the relevant question, which is if it's going to be a price cap hit, then the analysis has to be whether essentially the costs of compliance exceed or don't exceed the price you pay by not complying.

[00:40:58] Speaker 04:
I guess there's no such thing as a remand with vacature in the first case, because then the case is no longer live.

[00:41:11] Speaker 04:
I mean, the commission can do whatever it wants rule-wise, right?

[00:41:15] Speaker 04:
And I think they will and should, but let's say we say, you know, for this done,

[00:41:20] Speaker 04:
I mean, I don't know.

[00:41:24] Speaker 00:
I hope there's a vehicle for vacatur because I don't want to come back here two years from now saying, again, they were giving us a standard that gives leases completely in the dark.

[00:41:35] Speaker 00:
Thank you all very much.

[00:41:40] Speaker 04:
Please submit it.